Editorial: Is terrorism a risk for CFOs eyeing African opportunities?
With almost 150 students mercilessly massacred at the university of Garissa in Eastern Kenya last week, terrorism is suddenly top of mind again for (South African) businesses looking to move (further) into the continent. Within a week after the successful and democratic elections in Nigeria, the pendulum has swung back with a vengeance. Tourists are shocked and are cancelling their Kenyan safaris in droves, although places like the Masai Mara have been out of bounds for the Islamic extremists of al-Shabaab so far. Should CFOs show similar caution?
Of course many multinationals have operated in risky areas in Africa for decades, the oil risk delta area of Nigeria comes to mind as example. Kidnappings of staff have driven up insurance and protection cost, but as long as there is good money to be made, those incidents have never prompted the exit of businesses like Shell.
Islamic terrorism, perpetrated by a minority of extremists within an overall peaceful religion, somehow seems another cup of tea. In Nigeria Boko Haram has until now mostly stayed away from areas where international businesses operate - like Lagos - although the capital Abuja has been targeted once of twice. The same goes for al-Shabaab in Kenya: most attacks have happened in the coastal region and the border area with Somalia. At the same time, coastal city Mombasa lies close to the 'danger zone' and Nairobi has been targeted as well - a blood bath in the popular West Gate mall being the worst incident so far.
Terrorism is violent crime on steroids - it has an incredibly powerful PR effect (which is exactly what the terrorists are after). The chance of dying in a traffic-related accident is, however, many times higher in places like Abuja, Nairobi... and Johannesburg. Do CFOs calculate the risk of traffic safety when entering a new geography? If not, why would occasional terror attacks sway an investment decision?
It is a reality that the PR effect of terrorism can be detrimental for a country and can ruin an investment climate, whether threats are perceived or real. Any CFO would be well-advised to keep reading the newspapers keenly.